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General Motors (GM) to Discontinue Vehicle Sales in India

Zacks

General Motors Company GM plans to stop selling vehicles in India. The company also intends to sell its South African operations. This initiative is aimed to help generate cash and focus on more profitable markets.

The company will report charges of $500 million in the second quarter of 2017 for restructuring in India, Singapore and Africa. Of this, $200 million is likely to be a cash charge. The steps are expected to help the company save roughly $100 million a year in a sector of General Motors' global business that lost about $800 million in 2016.

The company might make changes in the planned $1 billion investment for the development of low-cost vehicles in India. However, it will continue its manufacturing operations in the region.

The company has also decided to sell its operation in South Africa to Isuzu Motors Ltd. Operations in the region are relatively small.


Earlier this year, General Motors announced the sale of its European businesses. It agreed to sell the Opel/Vauxhall subsidiary and GM Financial’s European operations to French automaker, PSA Group. The business has remained unprofitable over the last few years. With the sale of its European businesses, the company intends to focus on its core automotive business and development of new technologies, thereby working toward its transformation. In 2015, the company sold its Russian operations.

General Motors has been undertaking several initiatives to increase cash generation and improve profitability across its business. The company is undertaking cost-cutting measures as well as making structural changes for the same. Moreover, it is concentrating on investment in emerging markets, which are expected to grow at a fast pace. According to IHS forecasts, sales in India, Brazil and Russia will rise 40% to over 12 million vehicles by 2020. The company will now focus on China and Brazil in the emerging markets.

Price Performance

General Motors underperformed the Zacks categorized Automotive-Domestic industry in the last three months. Shares of the company lost 12.7% over the period while the industry saw a 5.9% decrease.

Zacks Rank & Key Picks

General Motors currently carries a Zacks Rank #3 (Hold).

Some better-ranked companies in the auto space include Allison Transmission Holdings, Inc. ALSN, Ferrari N.V. RACE and Fiat Chrysler Automobiles N.V. FCAU.

Allison Transmission has a long-term growth rate of 11% and sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Ferrari, also a Zacks Rank #1, has an expected long-term growth rate of 14.1%.

Fiat has an expected long-term growth rate of 22.4% and carries a Zacks Rank #2 (Buy).

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